Federal Government Changes to Mortgage Lending

This is the fourth time over the last 4 years that the Federal Government has changed the rules for mortgage insurance. This was done to cool the hot Canadian housing market without raising interest rates, which would have a negative impact on the economy.

The four major changes effective July 9, 2012 are as follows:

1) The maximum amortization on a prime mortgage will be reduced from 30 to 25 years. This change can effectively change the price of the home you can afford by approximately 10%. Please speak with your mortgage provider for their expert advice.

2) Refinancing has been lowered from a maximum of 85% loan-to-value to a maximum of 80% loan-to-value.

3) Mortgage insurance will not be provided for properties valued over $1 million. This change means for someone wishing to purchase a home for over $1 million, your down payment must be over 20% of the purchase price.

4) The maximum gross debt service (GDS) and total debt service (TDS) will be limited to a maximum of 39% and 44% respectively. Currently, GDS does not apply to qualified borrowers with credit scores over 680.

The first two measures will have the most drastic effect on real estate purchases. 1st time home buyers and people who are planning on upsizing will be the most affected by these srticter rules.

These tighter mortgage approval criteria will reduce the number of "higher risk" borrowers who can qualify for a mortgage.

If you are planning on purchasing a home or are wondering what the implications of these new measures are with your existing home are please contact me at:

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